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ASEAN must develop its own digital strategy for the sake of home-grown firms

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26 Jan ASEAN must develop its own digital strategy for the sake of home-grown firms

As the ASEAN chair for 2018, one of Singapore’s priorities is promoting the region’s growing digital economy. The figures are promising. South-east Asia’s digital economy holds strong potential, and is expected to exceed US$200 billion by 2025. Digital technologies present ASEAN member states with the opportunity to move up the value chain and access a larger market of goods, services and information.

However, there is a need to ensure that home-grown South-east Asian companies, including Micro, Small and Medium Enterprises (MSMEs) are able to benefit from the digital economy. The current generation of Free Trade Agreements (FTAs) being negotiated at the regional or global level, such as the CPTPP (the successor to the TPP, following the withdrawal of the United States), the RCEP, and EU-ASEAN FTA are explicitly intended to facilitate e-commerce and the digital economy. But a recent discussion paper published by the Economic Research Institute for ASEAN and East Asia (ERIA) suggests that the above FTAs do not stand to benefit local players. Instead, the regime presently being constructed may effectively guarantee the continued monopoly of already-dominant tech companies, mostly from developed countries.

One key example is the non-disclosure rule, which mandates that source code must be kept secret. Under this principle, a government cannot require a firm or individual to provide access to their software’s source code, as a condition for being allowed to supply a service. While such strong protection of source code serves as a strong safeguard of an owner’s intellectual property rights, the ERIA paper argues that this it can potentially act as a barrier for knowledge and technology transfer. Reliance on expensive imported technology could also make ASEAN businesses uncompetitive.

The current RCEP chapter on e-commerce has been largely adapted from the TPP negotiations. What this means is that developing countries, including most of ASEAN, have become rule-takers rather than rule-makers in this new generation of mega-FTAs. The implications are severe, including potential impediments to development and negative consequences for financial and labour markets.

It is therefore crucial that ASEAN comes together to develop its own digital industrialisation strategy, one with ASEAN’s core interests at heart. This should include appropriate national and regional regulatory frameworks that can advance digital industrialisation at both the national and regional level, for instance encouraging joint ventures and providing financial assistance for technology development.

ASEAN countries such as Singapore, Indonesia, Thailand and Vietnam have already introduced Industry 4.0 roadmaps, illustrating that digitisation is a shared priority across the region. As Singapore moves along in its chairmanship, a push for an inclusive digital framework that advances the interests of home-grown firms is necessary.

Source:

The Risks for ASEAN of New Mega-Agreements that Promote the Wrong Model of e-Commerce [ERIA Discussion Paper Series, Oct 2017] (PDF)